There's a claim going around that tomato prices will likely increase 40% to 85% with a new tariff.

First of all, why would there be a new tariff on tomatoes in the first place?

The tariff follows the end of the Suspension Agreement on Fresh Tomatoes from Mexico. A paper from the University of Florida explained the deal, which was first agreed upon in 1996 and renewed in 2013.

The agreement was a response to American tomato farmers’ concerns that Mexican farmers were “dumping” undervalued tomatoes into the American market, artificially lowering the prices of tomatoes across the board. The agreement set a price floor for Mexican tomatoes entering the American market, which was increased significantly in 2013.

After receiving pressure from the Florida Tomato Exchange, the United States Department of Commerce announced February 6 they would withdraw from the agreement effective May 7 and resume an investigation into dumping.

The end of the agreement also meant the beginning of tariffs. So why exactly are prices expected to rise?

A tariff is a tax paid by an importer when importing a product from a country that the tariffs are placed on. Importers can deal with this in a number of ways. 

They could for other avenues to get their goods, possibly from a domestic source, or they could continue getting their good from the same place and then pass the tax onto the consumer by raising the price of the product.

Therefore, it’s a very real possibility that the cost of tomatoes will increase as that often happens when a tariff is placed onto a good. However, it’s not a guaranteed outcome.

However, there also remains the possibility that a new deal can be negotiated and agreed upon before consumers see a price hike. Negotiations between the Department of Commerce and Mexican signatories have been ongoing since January of 2018.